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Suppose That the Home Country in the Two-Sector (Manufacturing and Agriculture)

question 144

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Suppose that the home country in the two-sector (manufacturing and agriculture) specific-factors model has a comparative advantage in manufacturing output. What will happen to the return (rental) on capital when trade occurs?


Definitions:

Pure Discount Debt

is a form of debt financing where the borrower issues securities at a discount from their face value, which will be repaid at maturity for the full face value.

Risk-Free Rate

The theoretical return on an investment with zero risk, representing the interest an investor would expect from an absolutely risk-free investment over a specific period.

Debt

Money that is owed or due to another individual or entity.

Market Value

The going rate for buying or selling a service or asset.

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